Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Rules and Fee Schedule Relating to Participant and Pledgee Applications, 31223-31227 [2018-14298]

Download as PDF Federal Register / Vol. 83, No. 128 / Tuesday, July 3, 2018 / Notices All submissions should refer to File Number SR–NYSEArca–2018–40. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s internet website (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–NYSEArca–2018–40, and should be submitted on or before July 24, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.31 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018–14300 Filed 7–2–18; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION sradovich on DSK3GMQ082PROD with NOTICES [Release No. 34–83544; File No. SR–DTC– 2018–002] Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Rules and Fee Schedule Relating to Participant and Pledgee Applications June 28, 2018. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 31 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 17:07 Jul 02, 2018 Jkt 244001 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on June 21, 2018, The Depository Trust Company (‘‘DTC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II and III below, which Items have been prepared by the clearing agency. DTC filed the proposed rule change pursuant to Section 19(b)(3)(A) of the Act 3 and Rules 19b–4(f)(2) and (f)(4) thereunder.4 The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Clearing Agency’s Statement of the Terms of Substance of the Proposed Rule Change The proposed rule change of DTC 5 consists of proposed modifications to (i) the DTC Fee Schedule (‘‘Fee Schedule’’) 6 to add two new application fees that would be charged, respectively, to legal entities that formally submit an application (‘‘Application’’) to become either a Participant 7 (each, a ‘‘Participant Applicant’’) or a Pledgee 8 (each, a ‘‘Pledgee Applicant’’) of DTC (Participant Applicants and Pledgee Applicants, referred to collectively as ‘‘Applicants’’), and (ii) DTC’s Policy Statements on the Admission of Participants (jointly referred to as the ‘‘Policy Statement’’) with respect to the provision that requires a non-U.S. entity that applies to become a Participant (‘‘Non-U.S. Participant Applicant’’) to provide to DTC a legal opinion (‘‘Foreign Legal Opinion’’) of its counsel in its jurisdiction of organization (‘‘Jurisdiction of Organization’’).9 With respect to (i) above, the Fee Schedule would be amended to charge (A) each Participant Applicant a fee of $5,000 in connection with its Application to become a Participant (‘‘Participant Application Fee’’), and (B) each Pledgee Applicant a fee of $2,500 in connection with its Application to become a Pledgee (‘‘Pledgee Application Fee’’) (Participant Application Fee and Pledgee Application Fee, collectively referred to as ‘‘Application Fees’’). With respect to (ii) above, the Policy Statement would be amended to (A) U.S.C. 78s(b)(1). CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b–4(f)(2) and (f)(4). 5 Capitalized terms not defined herein are defined in the Rules, By-Laws and Organization Certificate of DTC (the ‘‘Rules’’), available at www.dtcc.com/ ∼/media/Files/Downloads/legal/rules/dtc_rules.pdf. 6 Available at https://www.dtcc.com/∼/media/ Files/Downloads/legal/fee-guides/ dtcfeeguide.pdf?la=en. 7 See Rule 2, Section 1, supra note 5. 8 See Rule 2, Section 3, supra note 5. 9 See Policy Statement, supra note 5 at 133–134. PO 00000 1 15 2 17 Frm 00107 Fmt 4703 Sfmt 4703 31223 remove the provision that requires each Non-U.S. Participant Applicant to obtain a Foreign Legal Opinion from its counsel and (B) provide that DTC would obtain a Foreign Legal Opinion from its outside counsel (‘‘DTC Counsel’’) in the Jurisdiction of Organization of a new Non-U.S. Participant Applicant, which opinion DTC would use in conjunction with its review of the Application of that and each subsequent new Non-U.S. Participant Applicant domiciled in that Jurisdiction of Organization, as described below. Each Non-U.S. Participant Applicant would be charged a fee (‘‘Foreign Legal Opinion Fee’’) with respect to the applicable Foreign Legal Opinion obtained by DTC, as described below. The proposed rule change would also amend the Policy Statement to impose a time limit (‘‘Time Limit’’) of six months for an Applicant to complete its Application with required documentation (‘‘Required Documentation’’),10 before its Application would expire, as described below. The proposed rule change would also make other changes of a technical nature to the Rules text, as described below. II. Clearing Agency’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the clearing agency included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The clearing agency has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. 10 The Required Documentation relates to the DTC services the Applicant seeks to utilize and includes, but is not limited to, the applicable form of agreement with DTC providing, among other matters, that the Applicant will abide by the Rules and agreeing to New York governing law. There is a standard form Participant’s Agreement to be signed by a Participant Applicant, and a standard form Pledgee’s Agreement to be signed by a Pledgee Applicant. Certain certifications and other documentation, including but not limited to opinions of counsel, authorizing resolutions and appointment of authorized signers, may be required of a Participant Applicant depending on the nature and level of DTC services the Participant Applicant seeks to use. Participant Applicants are also required to provide certain financial and regulatory reports and other information, as applicable, to allow DTC to evaluate the Applicant’s financial condition, operational capability and character. See Rule 2, supra note 5, and the Policy Statement, supra note 9. E:\FR\FM\03JYN1.SGM 03JYN1 31224 Federal Register / Vol. 83, No. 128 / Tuesday, July 3, 2018 / Notices (A) Clearing Agency’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The proposed rule change consists of proposed modifications to (i) the Fee Schedule 11 to add the Application Fees and (ii) the Policy Statement with respect to the provision that requires a Non-U.S. Participant Applicant to provide a Foreign Legal Opinion, as described below. With respect to (i) above, the Fee Schedule would be amended to charge (A) each Participant Applicant the proposed Participant Application Fee, and (B) each Pledgee Applicant the proposed Pledgee Application Fee, as described below. With respect to (ii) above, the Policy Statement would be amended to (A) remove the provision that requires each Non-U.S. Participant Applicant to obtain a Foreign Legal Opinion from its counsel and (B) provide that DTC would obtain a Foreign Legal Opinion from DTC Counsel in the Jurisdiction of Organization of a new Non-U.S. Participant Applicant. Each Non-U.S. Participant Applicant would be charged a Foreign Legal Opinion Fee with respect to the applicable Foreign Legal Opinion obtained by DTC, as described below. The proposed rule change would also amend the Policy Statement to impose the Time Limit of six months for an Applicant to submit an Application, with Required Documentation, before its Application would expire, as described below. The proposed rule change would also make other changes of a technical nature to the Rules text, as described below. sradovich on DSK3GMQ082PROD with NOTICES Proposed Application Fees and Time Limit DTC may approve an Applicant eligible for admission as a Participant or Pledgee 12 only upon a determination by DTC that the Applicant meets reasonable standards of financial condition, operational capability and character at the time of its Application and on an ongoing basis thereafter.13 To facilitate DTC’s review of an Application, the Applicant must satisfy DTC’s Application requirements in form and substance satisfactory to DTC, including Required Documentation, in accordance with the Rules.14 11 Supra note 6. Rule 3, supra note 5 (setting forth qualifications for eligibility for Participants) and Section 3 of Rule 2, supra note 5 (setting forth Persons/entity types that may become Pledgees). 13 See Rule 2, supra note 5. 14 See Rule 2, supra note 5, and the Policy Statement, supra note 9 (setting forth Required Documentation and other requirements that an The review of Participant and Pledgee Applications by DTC requires significant application of personnel and other resources related to legal, risk, compliance, account administration and other functions. In order to align revenue with these costs, DTC proposes to amend the Fee Schedule to charge (i) a Participant Application Fee of $5,000 to each Participant Applicant that formally submits a Participant Application on or after July 2, 2018 (‘‘Effective Date’’) and (ii) a Pledgee Application Fee of $2,500 to each Pledgee Applicant that formally submits a Pledgee Application on or after the Effective Date. Payment of the full amount of the applicable Application Fee would be due as of the date DTC provides the Applicant with access to DTC’s online Application portal (‘‘Portal’’) 15 and related payment instructions. An Application Fee would be nonrefundable regardless of the outcome of the respective Application (i.e., approval, disapproval or expiration). Pursuant to the proposed rule change, if an Applicant does not submit a completed Application with Required Documentation within the Time Limit of six months (‘‘Submission Timeframe’’), then the Application would expire. If after the expiration of an Application, the entity still wishes to apply, it would be required to formally re-apply by submitting a new Application with the Required Documentation, and incur another charge for the applicable Application Fee. The Submission Timeframe would begin on the date that DTC provides the Applicant with access to the Portal. DTC believes the proposed Time Limit is reasonable, necessary and appropriate because (i) Required Documentation consists primarily of standard forms and other documentation, certifications and information, as applicable, that would be readily available to an Applicant that meets the applicable DTC membership qualifications and financial and operational requirements mentioned above and (ii) information contained in the Application and Required Documentation submitted by the Applicant, including financial reports and information, authorizing resolutions, appointment of authorized signers and opinions of counsel, may become out-of-date and/or inaccurate 12 See VerDate Sep<11>2014 17:07 Jul 02, 2018 Jkt 244001 Applicant must satisfy prior to DTC’s approval of the Applicant’s Application). 15 The Portal is a closed website that allows Applicants to retrieve the Application forms and templates of Required Documentation and to submit completed Applications, including Required Documentation, to DTC. PO 00000 Frm 00108 Fmt 4703 Sfmt 4703 due to internal operational or financial changes at the Applicant, or due to changes in applicable law, if an Applicant does not complete an Application in a timely manner. Proposed Legal Opinion Fee The Required Documentation for U.S. and Non-U.S. Participant Applicants includes an opinion of counsel of the Applicant.16 The Applicant’s counsel must provide an opinion to the effect that the Participant’s Agreement— which, among other provisions, provides that the DTC Rules and ByLaws shall be a part of the terms and conditions of every contract or transaction that the Participant may make or have with DTC—will be binding and enforceable on the Applicant when it becomes a Participant.17 To the extent that a Participant Applicant is organized under the laws of a jurisdiction outside of the United States, the required opinion must, in addition, specifically address issues such as DTC’s ability to enforce its Rules (including its netting and default management rules) under the applicable insolvency regime of the Jurisdiction of Organization, and the enforceability of the choice of New York law to govern the Participant’s Agreement and Rules.18 In order to address the legal costs of the review of legal opinion letters for Non-U.S. Participant Applicants, DTC proposes to modify the current process for obtaining Foreign Legal Opinions and implement the new Foreign Legal Opinion Fee. Currently, the Non-U.S. Participant Applicant provides a Foreign Legal Opinion from counsel in its Jurisdiction of Organization; the opinion is then reviewed (and negotiated with the Applicant’s counsel, as needed) by DTC with the advice of DTC’s counsel. Costs to DTC to review Foreign Legal Opinions vary depending on issues raised by an Applicant’s counsel in their Foreign Legal Opinion, and the level of review and negotiation required for DTC to gain comfort that the law of the Applicant’s Jurisdiction of Organization does not provide material impediments to enforcement of the Rules. Foreign Legal Opinion review is typically conducted by DTC with its U.S. counsel. Often, DTC may also need advice from outside counsel in the foreign jurisdiction of the Applicant, adding to the cost of the review. 16 See Sections 1 and 2 of Policy Statement, supra note 9. 17 See Section 1 of Rule 2, supra note 5 (setting forth the terms of the Participant’s Agreement). 18 See Section 2 of Policy Statement, supra note 9. E:\FR\FM\03JYN1.SGM 03JYN1 sradovich on DSK3GMQ082PROD with NOTICES Federal Register / Vol. 83, No. 128 / Tuesday, July 3, 2018 / Notices Pursuant to the proposed rule change, DTC would select DTC Counsel to provide a Foreign Legal Opinion satisfactory to DTC for each applicable Jurisdiction of Organization. DTC would rely on each Foreign Legal Opinion for a specified time (subject to any interim change in applicable law). The proposed rule change would benefit Non-U.S. Participant Applicants because efficiencies would be gained from consolidating the process so that each Non-U.S. Participant Applicant would not be required to obtain a separate Foreign Legal Opinion. When the specified period expires, DTC would obtain periodic updates from its counsel, as reasonable. Pursuant to the proposed rule change, the Fee Schedule would reflect that the initial Non-U.S. Participant Applicant from a given Jurisdiction of Organization to submit a Participant Application after the Effective Date, would be advised of a ‘‘Maximum Estimated Charge’’ based on an estimate of fees and charges provided to DTC by DTC Counsel with respect to obtaining a Foreign Legal Opinion for that Jurisdiction of Organization. DTC would advise the Non-U.S. Participant Applicant of the Maximum Estimated Charge in writing after DTC has had a reasonable opportunity to consult with DTC Counsel and obtain an estimate of fees and charges of DTC Counsel that would comprise the Maximum Estimated Charge. DTC would attempt to minimize costs of DTC Counsel as reasonable. The amount of the Foreign Legal Opinion Fee charged to the Non-U.S. Participant Applicant would be the lesser of the Maximum Estimated Charge and the actual costs charged to DTC by DTC Counsel in connection with the review of the Foreign Legal Opinion. If within five business days after DTC advises the Non-U.S. Participant Applicant of the Maximum Estimated Charge, as described above, the Non-U.S. Participant Applicant notifies DTC in writing that it will terminate its Participant Application, the Non-U.S. Participant Applicant would not be charged a Foreign Legal Opinion Fee. If the Application is terminated, the Maximum Estimated Charge would no longer apply and DTC would obtain a new Maximum Estimated Charge from DTC Counsel if it receives a subsequent Application. If the initial Non-U.S. Participant Applicant does not terminate its Application within five business days of DTC advising it of the Maximum Estimated Charge, then the Non-U.S. Applicant would be billed for the Legal Opinion Fee in the amount that would be determined as described VerDate Sep<11>2014 17:07 Jul 02, 2018 Jkt 244001 above, promptly after DTC Counsel has provided to DTC a final invoice stating the actual amount to be charged to DTC for the Foreign Legal Opinion. Payment by the Non-U.S. Participant Applicant of the full amount of the Foreign Legal Opinion Fee would be due within ten business days of the Non-U.S. Participant Applicant’s receipt of an invoice, including payment instructions, from DTC. Each subsequent Non-U.S. Participant Applicant (‘‘Subsequent Non-U.S. Applicant’’) from a Jurisdiction of Organization would be charged a Foreign Legal Opinion Fee in an amount equal to the Foreign Legal Opinion Fee charged to the first Non-U.S. Participant Applicant from the Jurisdiction of Organization that was charged a Foreign Legal Opinion Fee. DTC would notify each Subsequent Non-U.S. Applicant in writing of the amount of the Legal Opinion Fee that was determined as described above. If within five business days after DTC advises the Subsequent Non-U.S. Participant Applicant of the applicable Legal Opinion Fee, the NonU.S. Participant Applicant notifies DTC in writing that it will terminate its Participant Application, the Non-U.S. Participant Applicant would not be charged a Foreign Legal Opinion Fee. If the Subsequent Non-U.S. Applicant does not terminate its Application within five business days of DTC advising it of the amount of the Legal Opinion Fee, then the Applicant would be billed accordingly. Payment by the Non-U.S. Participant Applicant of the full amount of the Foreign Legal Opinion Fee would be due within ten business days of the Non-U.S. Participant Applicant’s receipt of an invoice, including payment instructions, from DTC. The Fee Schedule would not expressly include an absolute maximum amount for the Foreign Legal Opinion Fee because, based on DTC’s experience in reviewing Foreign Legal Opinions, the level of review required for DTC to gain comfort that the law of the Applicant’s Jurisdiction of Organization does not provide material impediments to enforcement of the Rules can vary significantly by jurisdiction, resulting in significant variance in counsel costs to DTC. The Fee Schedule would not include an absolute minimum amount for the Foreign Legal Opinion Fee, because DTC would not charge an Applicant a Foreign Legal Opinion Fee that is in an amount that is higher than the actual amount billed by DTC Counsel to provide the applicable Foreign Legal Opinion. PO 00000 Frm 00109 Fmt 4703 Sfmt 4703 31225 Proposed Rule Changes DTC proposes to amend (i) the text of the Policy Statement to (a) delete text requiring that a Foreign Legal Opinion be submitted by each Non-U.S. Participant Applicant, (b) add text to reflect that the Non-U.S. Participant Applicant would be required to agree to pay a fee (i.e., Foreign Legal Opinion Fee) relating to DTC obtaining a Foreign Legal Opinion from DTC Counsel, as discussed above, and (c) add a new Section 3 to the Policy Statement titled ‘‘Policy Statement on Application Fees and Time Limit for Submission of Applications and Required Documentation by Applicants,’’ which would set forth the proposed Time Limit and a reference to the proposed Application Fees, as described above, and (ii) the DTC Fee Schedule to add the Application Fees and Foreign Legal Opinion Fee (and related terms of payment), as described above. The proposed rule change would also make a technical change to modify the title of the Policy Statement to ‘‘Policy Statements on the Admission of Participants and Pledgees.’’ In addition, the Policy Statement would be amended to add a legend (‘‘Legend’’) stating that changes to the Policy Statement, as amended by this proposed rule change, are available at a link on www.dtcc.com. The Legend would also state that the changes have become effective upon filing with the Commission but have not yet been implemented. The Legend would state that on the Effective Date these changes will be implemented and the Legend will automatically be removed from the Policy Statement. Effective Date The proposed rule change would become effective on the Effective Date. 2. Statutory Basis Section 17A(b)(3)(D) of the Act 19 requires that the Rules provide for the equitable allocation of reasonable dues, fees, and other charges among its participants. DTC believes that the proposed Application Fees for Participants would be (i) equitably allocated because each Participant Applicant would be charged a fee for its Participant Application in an amount equal to the amount that each other Participant Applicant would be charged and (ii) reasonable because the respective Application Fees would allow DTC to pass through to Participant Applicants the substantial costs to DTC associated with the review of Participant Applications that would 19 15 E:\FR\FM\03JYN1.SGM U.S.C. 78q–1(b)(3)(D). 03JYN1 sradovich on DSK3GMQ082PROD with NOTICES 31226 Federal Register / Vol. 83, No. 128 / Tuesday, July 3, 2018 / Notices otherwise be incurred by DTC. DTC believes the proposed Foreign Legal Opinion Fee would be equitably allocated because the amount charged to each Non-U.S. Participant Applicant with respect to a given Jurisdiction of Organization would be tied to, and would not exceed, the cost to DTC in obtaining the opinion for that jurisdiction, and, in accordance with the amendment to the Fee Schedule as described above, a Foreign Legal Opinion Fee in the same amount would be charged to all Applicants domiciled in the Jurisdiction of Organization for which an applicable Foreign Legal Opinion was obtained. In addition, DTC believes that the proposed Foreign Legal Opinion Fee would be reasonable because it (i) would be capped in the amount of the Maximum Estimated Charge, as described above, (ii) the amount of a Foreign Legal Opinion Fee charged to an Applicant would not be greater than the costs DTC may incur in connection with obtaining the applicable Foreign Legal Opinion, as described above and (iii) would allow DTC to pass through to Non-U.S. Participant Applicants the substantial costs to DTC associated with the review of Foreign Legal Opinions that would otherwise be incurred by DTC. Therefore, DTC believes that the proposed rule change would provide for the equitable allocation of reasonable fees among its participants, and is consistent with Section 17A(b)(3)(D).20 Section 17A(b)(3)(F) 21 of the Act, requires, inter alia, that the Rules are designed to promote the prompt and accurate clearance and settlement of securities transactions. DTC believes that the proposed rule change to implement the Pledgee Application Fee is consistent with this provision because collection of the Pledgee Application Fee would facilitate DTC’s ability to cover costs to it associated with DTC’s review of Pledgee Applications, and therefore would facilitate DTC’s ability to make prompt determinations as to whether to make its services available to a Pledgee Applicant and allow the processing of Pledges by Participants to it within DTC’s system. Therefore, DTC believes that by facilitating the prompt admission of qualified Pledgees to DTC, and the inclusion of related pledge activity within the DTC system, the proposed rules change would promote the prompt and accurate clearance and settlement of securities transactions.22 In addition, DTC believes that the proposed rule change to modify the title of the Policy Statement to ‘‘Policy Statements on the Admission of Participants and Pledgees’’ is consistent with this provision because it would enhance clarity as to the application of the Policy Statement, and the users of DTC’s services that would be affected by it. By providing for enhanced clarity for users of DTC’s services in this regard, the proposed rule change would provide users with enhanced transparency with regard to the Rules relating to applying to be able to use DTC’s services, including for the processing of securities transactions, and, therefore, the proposed rule change would promote the prompt and accurate clearance and settlement of securities transactions. Section 17A(b)(3)(F) 23 of the Act, requires, inter alia, that the Rules are not designed to permit unfair discrimination in the admission of participants in the use of the clearing agency. DTC believes the proposed rule changes are consistent with this provision because (i) the proposal for DTC to obtain a single Foreign Legal Opinion from DTC Counsel for all new Non-U.S. Participant Applicants domiciled within a Jurisdiction of Organization, rather than requiring each Non-U.S. Participant Applicant to obtain an opinion from its own in its Jurisdiction of Organization, would provide for enhanced consistency in the review performed by DTC by eliminating the need for it to review multiple legal opinions submitted by each Applicant individually, and (ii) the proposed Time Limit would allow a sufficient amount of time for an Applicant to complete and submit to DTC the documentation and information necessary for DTC to be able to conduct its review of the Applicant’s Application, as discussed above. Therefore, DTC believes that the proposed rule change would not permit unfair discrimination in the admission of participants in the use of DTC, and is consistent with the provisions of Section 17A(b)(3)(F).24 (B) Clearing Agency’s Statement on Burden on Competition DTC believes that the proposed changes to the Fee Schedule could impose a burden on competition because it would implement new fees payable by an Applicant in connection with an Application to DTC, thereby creating costs to the Applicant not previously realized by Applicants. DTC does not believe that any burden on competition imposed by the changes to the Fee Schedule would be significant because (i) the Application Fees would represent de minimus amounts for qualified Applicants that meet DTC’s financial standards as set forth in the Policy Statement 25 and (ii) the Foreign Legal Opinion Fee is unlikely to cause a material impact to a Non-U.S. Participant Applicant’s overall cost of applying for DTC membership due to the coinciding proposal to eliminate the requirement for Non-U.S. Participant Applicants to provide a Foreign Legal Opinion, as described above, resulting in the elimination of the Applicant incurring the cost of obtaining a Foreign Legal Opinion from its own counsel. DTC believes that any burden on competition that is created by the proposed changes to the Fee Schedule would be necessary and appropriate in furtherance of the purposes of the Act 26 in order to cover substantial costs to DTC associated with the review of Participant and Pledgee Applications and Foreign Legal Opinions that would otherwise be incurred by DTC, and ultimately, because DTC operates on an ‘‘at cost’’ fee model, its Participants generally. DTC does not believe that the proposed rule change for DTC to obtain a single Foreign Legal Opinion from DTC Counsel for all Non-U.S. Participant Applicants domiciled within a Jurisdiction of Organization would impose a burden on competition, because it would it would merely shift the task of obtaining Foreign Legal Opinions to DTC. The proposed rule change may promote competition because DTC believes that the elimination of the requirement for each individual Non-U.S. Participant Applicant to obtain a Foreign Legal Opinion would facilitate enhanced consolidation and efficiency in the review of Non-U.S. Participant Applicants’ Applications by DTC, as described above. DTC does not believe the proposed rule change to implement the Time Limit for submission of Required Documentation would impact competition, because the Required Documentation consists primarily of standard agreements, forms and other documentation, certifications and information, as applicable, that are currently required of Applicants and would be readily available, or could be readily prepared, within the proposed Time Limit, by an Applicant that meets the applicable DTC membership qualifications and financial and 20 Id. 21 15 U.S.C. 78q–1(b)(3)(F). 23 Id. VerDate Sep<11>2014 17:07 Jul 02, 2018 Jkt 244001 PO 00000 25 See 24 Id. 22 Id. 26 15 Frm 00110 Fmt 4703 Sfmt 4703 E:\FR\FM\03JYN1.SGM supra note 9 at 132 and 134. U.S.C. 78q–1(b)(3)(I). 03JYN1 31227 Federal Register / Vol. 83, No. 128 / Tuesday, July 3, 2018 / Notices operational requirements mentioned above. (C) Clearing Agency’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others DTC has not received or solicited any written comments relating to this proposal. DTC will notify the Commission of any written comments received by DTC. III. Date of Effectiveness of the Proposed Rule Change, and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act and paragraph (f) of Rule 19b–4 thereunder. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: sradovich on DSK3GMQ082PROD with NOTICES Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– DTC–2018–002 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549. All submissions should refer to File Number SR–DTC–2018–002. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s internet website (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than VerDate Sep<11>2014 17:07 Jul 02, 2018 Jkt 244001 those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of DTC and on DTCC’s website (https://dtcc.com/legal/sec-rulefilings.aspx). All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–DTC– 2018–002 and should be submitted on or before July 24, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.27 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018–14298 Filed 7–2–18; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–83530; File No. SR–Phlx– 2018–50] Self-Regulatory Organizations; Nasdaq Phlx LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Extend the Exchange’s Penny Pilot Program June 28, 2018. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on June 25, 2018, Nasdaq Phlx LLC (‘‘Phlx’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. PO 00000 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Phlx Rule 1034 (Minimum Increments) 3 to extend through December 31, 2018 or the date of permanent approval, if earlier, the Penny Pilot Program in options classes in certain issues (‘‘Penny Pilot’’ or ‘‘Pilot’’), and to change the date when delisted classes may be replaced in the Penny Pilot. The text of the proposed rule change is set forth below. Proposed new language is italicized and proposed deleted language is in brackets. * * * * * Nasdaq PHLX Rules Options Rules * * * * * Rule 1034. Minimum Increments (a) Except as provided in subparagraphs (i)(B) and (iii) below, all options on stocks, index options, and Exchange Traded Fund Shares quoting in decimals at $3.00 or higher shall have a minimum increment of $.10, and all options on stocks and index options quoting in decimals under $3.00 shall have a minimum increment of $.05. (i)(A) No Change. (B) For a pilot period scheduled to expire [June 30, 2018]December 31, 2018 or the date of permanent approval, if earlier (the ‘‘pilot’’), certain options shall be quoted and traded on the Exchange in minimum increments of $0.01 for all series in such options with a price of less than $3.00, and in minimum increments of $0.05 for all series in such options with a price of $3.00 or higher, except that options overlying the PowerShares QQQ Trust (‘‘QQQQ’’)®, SPDR S&P 500 Exchange Traded Funds (‘‘SPY’’), and iShares Russell 2000 Index Funds (‘‘IWM’’) shall be quoted and traded in minimum increments of $0.01 for all series regardless of the price. A list of such options shall be communicated to membership via an Options Trader Alert (‘‘OTA’’) posted on the Exchange’s website. The Exchange may replace any pilot issues that have been delisted with the next most actively traded multiply listed options classes that are not yet included in the pilot, based on trading activity in the previous six months. The replacement issues may be added to the pilot on the second trading day following [January 1, 2018]July 1, 2018. (C) No Change. 27 17 1 15 Frm 00111 Fmt 4703 Sfmt 4703 3 References herein to rules refer to rules of Phlx, unless otherwise noted. E:\FR\FM\03JYN1.SGM 03JYN1

Agencies

[Federal Register Volume 83, Number 128 (Tuesday, July 3, 2018)]
[Notices]
[Pages 31223-31227]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-14298]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83544; File No. SR-DTC-2018-002]


Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend the Rules and Fee Schedule Relating to Participant and Pledgee 
Applications

June 28, 2018.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on June 21, 2018, The Depository Trust Company (``DTC'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change as described in Items I, II and III below, which Items have been 
prepared by the clearing agency. DTC filed the proposed rule change 
pursuant to Section 19(b)(3)(A) of the Act \3\ and Rules 19b-4(f)(2) 
and (f)(4) thereunder.\4\ The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(2) and (f)(4).
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    The proposed rule change of DTC \5\ consists of proposed 
modifications to (i) the DTC Fee Schedule (``Fee Schedule'') \6\ to add 
two new application fees that would be charged, respectively, to legal 
entities that formally submit an application (``Application'') to 
become either a Participant \7\ (each, a ``Participant Applicant'') or 
a Pledgee \8\ (each, a ``Pledgee Applicant'') of DTC (Participant 
Applicants and Pledgee Applicants, referred to collectively as 
``Applicants''), and (ii) DTC's Policy Statements on the Admission of 
Participants (jointly referred to as the ``Policy Statement'') with 
respect to the provision that requires a non-U.S. entity that applies 
to become a Participant (``Non-U.S. Participant Applicant'') to provide 
to DTC a legal opinion (``Foreign Legal Opinion'') of its counsel in 
its jurisdiction of organization (``Jurisdiction of Organization'').\9\ 
With respect to (i) above, the Fee Schedule would be amended to charge 
(A) each Participant Applicant a fee of $5,000 in connection with its 
Application to become a Participant (``Participant Application Fee''), 
and (B) each Pledgee Applicant a fee of $2,500 in connection with its 
Application to become a Pledgee (``Pledgee Application Fee'') 
(Participant Application Fee and Pledgee Application Fee, collectively 
referred to as ``Application Fees''). With respect to (ii) above, the 
Policy Statement would be amended to (A) remove the provision that 
requires each Non-U.S. Participant Applicant to obtain a Foreign Legal 
Opinion from its counsel and (B) provide that DTC would obtain a 
Foreign Legal Opinion from its outside counsel (``DTC Counsel'') in the 
Jurisdiction of Organization of a new Non-U.S. Participant Applicant, 
which opinion DTC would use in conjunction with its review of the 
Application of that and each subsequent new Non-U.S. Participant 
Applicant domiciled in that Jurisdiction of Organization, as described 
below. Each Non-U.S. Participant Applicant would be charged a fee 
(``Foreign Legal Opinion Fee'') with respect to the applicable Foreign 
Legal Opinion obtained by DTC, as described below. The proposed rule 
change would also amend the Policy Statement to impose a time limit 
(``Time Limit'') of six months for an Applicant to complete its 
Application with required documentation (``Required 
Documentation''),\10\ before its Application would expire, as described 
below. The proposed rule change would also make other changes of a 
technical nature to the Rules text, as described below.
---------------------------------------------------------------------------

    \5\ Capitalized terms not defined herein are defined in the 
Rules, By-Laws and Organization Certificate of DTC (the ``Rules''), 
available at www.dtcc.com/~/media/Files/Downloads/legal/rules/
dtc_rules.pdf.
    \6\ Available at https://www.dtcc.com/~/media/Files/Downloads/
legal/fee-guides/dtcfeeguide.pdf?la=en.
    \7\ See Rule 2, Section 1, supra note 5.
    \8\ See Rule 2, Section 3, supra note 5.
    \9\ See Policy Statement, supra note 5 at 133-134.
    \10\ The Required Documentation relates to the DTC services the 
Applicant seeks to utilize and includes, but is not limited to, the 
applicable form of agreement with DTC providing, among other 
matters, that the Applicant will abide by the Rules and agreeing to 
New York governing law. There is a standard form Participant's 
Agreement to be signed by a Participant Applicant, and a standard 
form Pledgee's Agreement to be signed by a Pledgee Applicant. 
Certain certifications and other documentation, including but not 
limited to opinions of counsel, authorizing resolutions and 
appointment of authorized signers, may be required of a Participant 
Applicant depending on the nature and level of DTC services the 
Participant Applicant seeks to use. Participant Applicants are also 
required to provide certain financial and regulatory reports and 
other information, as applicable, to allow DTC to evaluate the 
Applicant's financial condition, operational capability and 
character. See Rule 2, supra note 5, and the Policy Statement, supra 
note 9.
---------------------------------------------------------------------------

II. Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

    In its filing with the Commission, the clearing agency included 
statements concerning the purpose of and basis for the proposed rule 
change and discussed any comments it received on the proposed rule 
change. The text of these statements may be examined at the places 
specified in Item IV below. The clearing agency has prepared summaries, 
set forth in sections A, B, and C below, of the most significant 
aspects of such statements.

[[Page 31224]]

(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

1. Purpose
    The proposed rule change consists of proposed modifications to (i) 
the Fee Schedule \11\ to add the Application Fees and (ii) the Policy 
Statement with respect to the provision that requires a Non-U.S. 
Participant Applicant to provide a Foreign Legal Opinion, as described 
below. With respect to (i) above, the Fee Schedule would be amended to 
charge (A) each Participant Applicant the proposed Participant 
Application Fee, and (B) each Pledgee Applicant the proposed Pledgee 
Application Fee, as described below. With respect to (ii) above, the 
Policy Statement would be amended to (A) remove the provision that 
requires each Non-U.S. Participant Applicant to obtain a Foreign Legal 
Opinion from its counsel and (B) provide that DTC would obtain a 
Foreign Legal Opinion from DTC Counsel in the Jurisdiction of 
Organization of a new Non-U.S. Participant Applicant. Each Non-U.S. 
Participant Applicant would be charged a Foreign Legal Opinion Fee with 
respect to the applicable Foreign Legal Opinion obtained by DTC, as 
described below. The proposed rule change would also amend the Policy 
Statement to impose the Time Limit of six months for an Applicant to 
submit an Application, with Required Documentation, before its 
Application would expire, as described below. The proposed rule change 
would also make other changes of a technical nature to the Rules text, 
as described below.
---------------------------------------------------------------------------

    \11\ Supra note 6.
---------------------------------------------------------------------------

Proposed Application Fees and Time Limit
    DTC may approve an Applicant eligible for admission as a 
Participant or Pledgee \12\ only upon a determination by DTC that the 
Applicant meets reasonable standards of financial condition, 
operational capability and character at the time of its Application and 
on an ongoing basis thereafter.\13\ To facilitate DTC's review of an 
Application, the Applicant must satisfy DTC's Application requirements 
in form and substance satisfactory to DTC, including Required 
Documentation, in accordance with the Rules.\14\
---------------------------------------------------------------------------

    \12\ See Rule 3, supra note 5 (setting forth qualifications for 
eligibility for Participants) and Section 3 of Rule 2, supra note 5 
(setting forth Persons/entity types that may become Pledgees).
    \13\ See Rule 2, supra note 5.
    \14\ See Rule 2, supra note 5, and the Policy Statement, supra 
note 9 (setting forth Required Documentation and other requirements 
that an Applicant must satisfy prior to DTC's approval of the 
Applicant's Application).
---------------------------------------------------------------------------

    The review of Participant and Pledgee Applications by DTC requires 
significant application of personnel and other resources related to 
legal, risk, compliance, account administration and other functions. In 
order to align revenue with these costs, DTC proposes to amend the Fee 
Schedule to charge (i) a Participant Application Fee of $5,000 to each 
Participant Applicant that formally submits a Participant Application 
on or after July 2, 2018 (``Effective Date'') and (ii) a Pledgee 
Application Fee of $2,500 to each Pledgee Applicant that formally 
submits a Pledgee Application on or after the Effective Date.
    Payment of the full amount of the applicable Application Fee would 
be due as of the date DTC provides the Applicant with access to DTC's 
online Application portal (``Portal'') \15\ and related payment 
instructions. An Application Fee would be non-refundable regardless of 
the outcome of the respective Application (i.e., approval, disapproval 
or expiration).
---------------------------------------------------------------------------

    \15\ The Portal is a closed website that allows Applicants to 
retrieve the Application forms and templates of Required 
Documentation and to submit completed Applications, including 
Required Documentation, to DTC.
---------------------------------------------------------------------------

    Pursuant to the proposed rule change, if an Applicant does not 
submit a completed Application with Required Documentation within the 
Time Limit of six months (``Submission Timeframe''), then the 
Application would expire. If after the expiration of an Application, 
the entity still wishes to apply, it would be required to formally re-
apply by submitting a new Application with the Required Documentation, 
and incur another charge for the applicable Application Fee. The 
Submission Timeframe would begin on the date that DTC provides the 
Applicant with access to the Portal.
    DTC believes the proposed Time Limit is reasonable, necessary and 
appropriate because (i) Required Documentation consists primarily of 
standard forms and other documentation, certifications and information, 
as applicable, that would be readily available to an Applicant that 
meets the applicable DTC membership qualifications and financial and 
operational requirements mentioned above and (ii) information contained 
in the Application and Required Documentation submitted by the 
Applicant, including financial reports and information, authorizing 
resolutions, appointment of authorized signers and opinions of counsel, 
may become out-of-date and/or inaccurate due to internal operational or 
financial changes at the Applicant, or due to changes in applicable 
law, if an Applicant does not complete an Application in a timely 
manner.
Proposed Legal Opinion Fee
    The Required Documentation for U.S. and Non-U.S. Participant 
Applicants includes an opinion of counsel of the Applicant.\16\ The 
Applicant's counsel must provide an opinion to the effect that the 
Participant's Agreement--which, among other provisions, provides that 
the DTC Rules and By-Laws shall be a part of the terms and conditions 
of every contract or transaction that the Participant may make or have 
with DTC--will be binding and enforceable on the Applicant when it 
becomes a Participant.\17\ To the extent that a Participant Applicant 
is organized under the laws of a jurisdiction outside of the United 
States, the required opinion must, in addition, specifically address 
issues such as DTC's ability to enforce its Rules (including its 
netting and default management rules) under the applicable insolvency 
regime of the Jurisdiction of Organization, and the enforceability of 
the choice of New York law to govern the Participant's Agreement and 
Rules.\18\
---------------------------------------------------------------------------

    \16\ See Sections 1 and 2 of Policy Statement, supra note 9.
    \17\ See Section 1 of Rule 2, supra note 5 (setting forth the 
terms of the Participant's Agreement).
    \18\ See Section 2 of Policy Statement, supra note 9.
---------------------------------------------------------------------------

    In order to address the legal costs of the review of legal opinion 
letters for Non-U.S. Participant Applicants, DTC proposes to modify the 
current process for obtaining Foreign Legal Opinions and implement the 
new Foreign Legal Opinion Fee.
    Currently, the Non-U.S. Participant Applicant provides a Foreign 
Legal Opinion from counsel in its Jurisdiction of Organization; the 
opinion is then reviewed (and negotiated with the Applicant's counsel, 
as needed) by DTC with the advice of DTC's counsel.
    Costs to DTC to review Foreign Legal Opinions vary depending on 
issues raised by an Applicant's counsel in their Foreign Legal Opinion, 
and the level of review and negotiation required for DTC to gain 
comfort that the law of the Applicant's Jurisdiction of Organization 
does not provide material impediments to enforcement of the Rules. 
Foreign Legal Opinion review is typically conducted by DTC with its 
U.S. counsel. Often, DTC may also need advice from outside counsel in 
the foreign jurisdiction of the Applicant, adding to the cost of the 
review.

[[Page 31225]]

    Pursuant to the proposed rule change, DTC would select DTC Counsel 
to provide a Foreign Legal Opinion satisfactory to DTC for each 
applicable Jurisdiction of Organization. DTC would rely on each Foreign 
Legal Opinion for a specified time (subject to any interim change in 
applicable law). The proposed rule change would benefit Non-U.S. 
Participant Applicants because efficiencies would be gained from 
consolidating the process so that each Non-U.S. Participant Applicant 
would not be required to obtain a separate Foreign Legal Opinion. When 
the specified period expires, DTC would obtain periodic updates from 
its counsel, as reasonable.
    Pursuant to the proposed rule change, the Fee Schedule would 
reflect that the initial Non-U.S. Participant Applicant from a given 
Jurisdiction of Organization to submit a Participant Application after 
the Effective Date, would be advised of a ``Maximum Estimated Charge'' 
based on an estimate of fees and charges provided to DTC by DTC Counsel 
with respect to obtaining a Foreign Legal Opinion for that Jurisdiction 
of Organization. DTC would advise the Non-U.S. Participant Applicant of 
the Maximum Estimated Charge in writing after DTC has had a reasonable 
opportunity to consult with DTC Counsel and obtain an estimate of fees 
and charges of DTC Counsel that would comprise the Maximum Estimated 
Charge.
    DTC would attempt to minimize costs of DTC Counsel as reasonable. 
The amount of the Foreign Legal Opinion Fee charged to the Non-U.S. 
Participant Applicant would be the lesser of the Maximum Estimated 
Charge and the actual costs charged to DTC by DTC Counsel in connection 
with the review of the Foreign Legal Opinion. If within five business 
days after DTC advises the Non-U.S. Participant Applicant of the 
Maximum Estimated Charge, as described above, the Non-U.S. Participant 
Applicant notifies DTC in writing that it will terminate its 
Participant Application, the Non-U.S. Participant Applicant would not 
be charged a Foreign Legal Opinion Fee. If the Application is 
terminated, the Maximum Estimated Charge would no longer apply and DTC 
would obtain a new Maximum Estimated Charge from DTC Counsel if it 
receives a subsequent Application. If the initial Non-U.S. Participant 
Applicant does not terminate its Application within five business days 
of DTC advising it of the Maximum Estimated Charge, then the Non-U.S. 
Applicant would be billed for the Legal Opinion Fee in the amount that 
would be determined as described above, promptly after DTC Counsel has 
provided to DTC a final invoice stating the actual amount to be charged 
to DTC for the Foreign Legal Opinion. Payment by the Non-U.S. 
Participant Applicant of the full amount of the Foreign Legal Opinion 
Fee would be due within ten business days of the Non-U.S. Participant 
Applicant's receipt of an invoice, including payment instructions, from 
DTC.
    Each subsequent Non-U.S. Participant Applicant (``Subsequent Non-
U.S. Applicant'') from a Jurisdiction of Organization would be charged 
a Foreign Legal Opinion Fee in an amount equal to the Foreign Legal 
Opinion Fee charged to the first Non-U.S. Participant Applicant from 
the Jurisdiction of Organization that was charged a Foreign Legal 
Opinion Fee. DTC would notify each Subsequent Non-U.S. Applicant in 
writing of the amount of the Legal Opinion Fee that was determined as 
described above. If within five business days after DTC advises the 
Subsequent Non-U.S. Participant Applicant of the applicable Legal 
Opinion Fee, the Non-U.S. Participant Applicant notifies DTC in writing 
that it will terminate its Participant Application, the Non-U.S. 
Participant Applicant would not be charged a Foreign Legal Opinion Fee. 
If the Subsequent Non-U.S. Applicant does not terminate its Application 
within five business days of DTC advising it of the amount of the Legal 
Opinion Fee, then the Applicant would be billed accordingly. Payment by 
the Non-U.S. Participant Applicant of the full amount of the Foreign 
Legal Opinion Fee would be due within ten business days of the Non-U.S. 
Participant Applicant's receipt of an invoice, including payment 
instructions, from DTC.
    The Fee Schedule would not expressly include an absolute maximum 
amount for the Foreign Legal Opinion Fee because, based on DTC's 
experience in reviewing Foreign Legal Opinions, the level of review 
required for DTC to gain comfort that the law of the Applicant's 
Jurisdiction of Organization does not provide material impediments to 
enforcement of the Rules can vary significantly by jurisdiction, 
resulting in significant variance in counsel costs to DTC. The Fee 
Schedule would not include an absolute minimum amount for the Foreign 
Legal Opinion Fee, because DTC would not charge an Applicant a Foreign 
Legal Opinion Fee that is in an amount that is higher than the actual 
amount billed by DTC Counsel to provide the applicable Foreign Legal 
Opinion.
Proposed Rule Changes
    DTC proposes to amend (i) the text of the Policy Statement to (a) 
delete text requiring that a Foreign Legal Opinion be submitted by each 
Non-U.S. Participant Applicant, (b) add text to reflect that the Non-
U.S. Participant Applicant would be required to agree to pay a fee 
(i.e., Foreign Legal Opinion Fee) relating to DTC obtaining a Foreign 
Legal Opinion from DTC Counsel, as discussed above, and (c) add a new 
Section 3 to the Policy Statement titled ``Policy Statement on 
Application Fees and Time Limit for Submission of Applications and 
Required Documentation by Applicants,'' which would set forth the 
proposed Time Limit and a reference to the proposed Application Fees, 
as described above, and (ii) the DTC Fee Schedule to add the 
Application Fees and Foreign Legal Opinion Fee (and related terms of 
payment), as described above.
    The proposed rule change would also make a technical change to 
modify the title of the Policy Statement to ``Policy Statements on the 
Admission of Participants and Pledgees.''
    In addition, the Policy Statement would be amended to add a legend 
(``Legend'') stating that changes to the Policy Statement, as amended 
by this proposed rule change, are available at a link on www.dtcc.com. 
The Legend would also state that the changes have become effective upon 
filing with the Commission but have not yet been implemented. The 
Legend would state that on the Effective Date these changes will be 
implemented and the Legend will automatically be removed from the 
Policy Statement.
Effective Date
    The proposed rule change would become effective on the Effective 
Date.
2. Statutory Basis
    Section 17A(b)(3)(D) of the Act \19\ requires that the Rules 
provide for the equitable allocation of reasonable dues, fees, and 
other charges among its participants. DTC believes that the proposed 
Application Fees for Participants would be (i) equitably allocated 
because each Participant Applicant would be charged a fee for its 
Participant Application in an amount equal to the amount that each 
other Participant Applicant would be charged and (ii) reasonable 
because the respective Application Fees would allow DTC to pass through 
to Participant Applicants the substantial costs to DTC associated with 
the review of Participant Applications that would

[[Page 31226]]

otherwise be incurred by DTC. DTC believes the proposed Foreign Legal 
Opinion Fee would be equitably allocated because the amount charged to 
each Non-U.S. Participant Applicant with respect to a given 
Jurisdiction of Organization would be tied to, and would not exceed, 
the cost to DTC in obtaining the opinion for that jurisdiction, and, in 
accordance with the amendment to the Fee Schedule as described above, a 
Foreign Legal Opinion Fee in the same amount would be charged to all 
Applicants domiciled in the Jurisdiction of Organization for which an 
applicable Foreign Legal Opinion was obtained. In addition, DTC 
believes that the proposed Foreign Legal Opinion Fee would be 
reasonable because it (i) would be capped in the amount of the Maximum 
Estimated Charge, as described above, (ii) the amount of a Foreign 
Legal Opinion Fee charged to an Applicant would not be greater than the 
costs DTC may incur in connection with obtaining the applicable Foreign 
Legal Opinion, as described above and (iii) would allow DTC to pass 
through to Non-U.S. Participant Applicants the substantial costs to DTC 
associated with the review of Foreign Legal Opinions that would 
otherwise be incurred by DTC. Therefore, DTC believes that the proposed 
rule change would provide for the equitable allocation of reasonable 
fees among its participants, and is consistent with Section 
17A(b)(3)(D).\20\
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78q-1(b)(3)(D).
    \20\ Id.
---------------------------------------------------------------------------

    Section 17A(b)(3)(F) \21\ of the Act, requires, inter alia, that 
the Rules are designed to promote the prompt and accurate clearance and 
settlement of securities transactions. DTC believes that the proposed 
rule change to implement the Pledgee Application Fee is consistent with 
this provision because collection of the Pledgee Application Fee would 
facilitate DTC's ability to cover costs to it associated with DTC's 
review of Pledgee Applications, and therefore would facilitate DTC's 
ability to make prompt determinations as to whether to make its 
services available to a Pledgee Applicant and allow the processing of 
Pledges by Participants to it within DTC's system. Therefore, DTC 
believes that by facilitating the prompt admission of qualified 
Pledgees to DTC, and the inclusion of related pledge activity within 
the DTC system, the proposed rules change would promote the prompt and 
accurate clearance and settlement of securities transactions.\22\ In 
addition, DTC believes that the proposed rule change to modify the 
title of the Policy Statement to ``Policy Statements on the Admission 
of Participants and Pledgees'' is consistent with this provision 
because it would enhance clarity as to the application of the Policy 
Statement, and the users of DTC's services that would be affected by 
it. By providing for enhanced clarity for users of DTC's services in 
this regard, the proposed rule change would provide users with enhanced 
transparency with regard to the Rules relating to applying to be able 
to use DTC's services, including for the processing of securities 
transactions, and, therefore, the proposed rule change would promote 
the prompt and accurate clearance and settlement of securities 
transactions.
---------------------------------------------------------------------------

    \21\ 15 U.S.C. 78q-1(b)(3)(F).
    \22\ Id.
---------------------------------------------------------------------------

    Section 17A(b)(3)(F) \23\ of the Act, requires, inter alia, that 
the Rules are not designed to permit unfair discrimination in the 
admission of participants in the use of the clearing agency. DTC 
believes the proposed rule changes are consistent with this provision 
because (i) the proposal for DTC to obtain a single Foreign Legal 
Opinion from DTC Counsel for all new Non-U.S. Participant Applicants 
domiciled within a Jurisdiction of Organization, rather than requiring 
each Non-U.S. Participant Applicant to obtain an opinion from its own 
in its Jurisdiction of Organization, would provide for enhanced 
consistency in the review performed by DTC by eliminating the need for 
it to review multiple legal opinions submitted by each Applicant 
individually, and (ii) the proposed Time Limit would allow a sufficient 
amount of time for an Applicant to complete and submit to DTC the 
documentation and information necessary for DTC to be able to conduct 
its review of the Applicant's Application, as discussed above. 
Therefore, DTC believes that the proposed rule change would not permit 
unfair discrimination in the admission of participants in the use of 
DTC, and is consistent with the provisions of Section 17A(b)(3)(F).\24\
---------------------------------------------------------------------------

    \23\ Id.
    \24\ Id.
---------------------------------------------------------------------------

(B) Clearing Agency's Statement on Burden on Competition

    DTC believes that the proposed changes to the Fee Schedule could 
impose a burden on competition because it would implement new fees 
payable by an Applicant in connection with an Application to DTC, 
thereby creating costs to the Applicant not previously realized by 
Applicants. DTC does not believe that any burden on competition imposed 
by the changes to the Fee Schedule would be significant because (i) the 
Application Fees would represent de minimus amounts for qualified 
Applicants that meet DTC's financial standards as set forth in the 
Policy Statement \25\ and (ii) the Foreign Legal Opinion Fee is 
unlikely to cause a material impact to a Non-U.S. Participant 
Applicant's overall cost of applying for DTC membership due to the 
coinciding proposal to eliminate the requirement for Non-U.S. 
Participant Applicants to provide a Foreign Legal Opinion, as described 
above, resulting in the elimination of the Applicant incurring the cost 
of obtaining a Foreign Legal Opinion from its own counsel. DTC believes 
that any burden on competition that is created by the proposed changes 
to the Fee Schedule would be necessary and appropriate in furtherance 
of the purposes of the Act \26\ in order to cover substantial costs to 
DTC associated with the review of Participant and Pledgee Applications 
and Foreign Legal Opinions that would otherwise be incurred by DTC, and 
ultimately, because DTC operates on an ``at cost'' fee model, its 
Participants generally.
---------------------------------------------------------------------------

    \25\ See supra note 9 at 132 and 134.
    \26\ 15 U.S.C. 78q-1(b)(3)(I).
---------------------------------------------------------------------------

    DTC does not believe that the proposed rule change for DTC to 
obtain a single Foreign Legal Opinion from DTC Counsel for all Non-U.S. 
Participant Applicants domiciled within a Jurisdiction of Organization 
would impose a burden on competition, because it would it would merely 
shift the task of obtaining Foreign Legal Opinions to DTC. The proposed 
rule change may promote competition because DTC believes that the 
elimination of the requirement for each individual Non-U.S. Participant 
Applicant to obtain a Foreign Legal Opinion would facilitate enhanced 
consolidation and efficiency in the review of Non-U.S. Participant 
Applicants' Applications by DTC, as described above.
    DTC does not believe the proposed rule change to implement the Time 
Limit for submission of Required Documentation would impact 
competition, because the Required Documentation consists primarily of 
standard agreements, forms and other documentation, certifications and 
information, as applicable, that are currently required of Applicants 
and would be readily available, or could be readily prepared, within 
the proposed Time Limit, by an Applicant that meets the applicable DTC 
membership qualifications and financial and

[[Page 31227]]

operational requirements mentioned above.

(C) Clearing Agency's Statement on Comments on the Proposed Rule Change 
Received From Members, Participants, or Others

    DTC has not received or solicited any written comments relating to 
this proposal. DTC will notify the Commission of any written comments 
received by DTC.

III. Date of Effectiveness of the Proposed Rule Change, and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act and paragraph (f) of Rule 19b-4 thereunder. At 
any time within 60 days of the filing of the proposed rule change, the 
Commission summarily may temporarily suspend such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-DTC-2018-002 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549.

All submissions should refer to File Number SR-DTC-2018-002. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of DTC and on DTCC's website 
(https://dtcc.com/legal/sec-rule-filings.aspx). All comments received 
will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-DTC-2018-002 and should be submitted on 
or before July 24, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\27\
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    \27\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-14298 Filed 7-2-18; 8:45 am]
BILLING CODE 8011-01-P
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